Impact-Measurement-Exploring-its-Role-in-Impact-Investing

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Exploring its Role in
Impact Investing
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Impact Measurement:
Impact Investing
Impac
Invest
and S
Impac
mpact
nvestm
nd So
mpactBessi Graham & Elliot Anderson

Impact Measurement:
This Report
may be
Cited as:
Graham, B and Anderson,
E, Impact Measurement:
Exploring its role in Impact
Investing, National Australia
Bank, The Difference
Incubator and Benefit
Capital, 2015
Our
to th
Our
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Our
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1
Impact Investing
This report was commissioned by a partnership
between National Australia Bank (NAB), The
Difference Incubator (TDi) and Benefit Capital,
to explore measurement of impact investment
from a practitioner perspective. Having worked
together over the last four years this report
consolidates the work across the partnership
in the areas of impact measurement and
impact investment.
This report was produced in stages over a
period of three months in 2014. TDi established
a working group that performed a literature
review and market scan of measurement
frameworks. To inform the report findings a
limited consultation with active impact investors
and social enterprises that have taken on
investment was also conducted.
Our Approach
to the
Research
Contributors
Bessi Graham, CEO of TDi and Co-Founder of
both TDi and Benefit Capital and Elliot Anderson,
Senior Consultant Community Finance &
Development, NAB, authored and developed the
architecture of the report.
Contributions were also made by Paul Steele,
CEO of donkey wheel foundation and Co-
Founder of both TDi and Benefit Capital; Isaac
Jeffries of TDi and Abbie Matthews of donkey
wheel foundation; Corinne Proske, Head of
Community Finance and Development, NAB.

2
Impact Measurement:
Con-
tents
Con-
tents
Con-
tents

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Impact Investing
Executive Summary pg 5
Introduction pg 7
The International
and Local Context pg 8
Impact Investment pg 10
What is
Impact Investment pg 11
There is a Need for
Catalytic Funds in the
Impact Investment Sector pg 13
Impact Investment is an
Opportunity to Leverage
Philanthropic Funds pg 14
Payment by Outcomes
and Social Impact Bonds pg 15
The Impact
Investment Process pg 17
Building Measurement
Into the Business Model
for Social Enterprises pg 18
Impact Measurement pg 19
What is
Impact Measurement? pg 20
Knowing Your Audience pg 24
What are Impact Investors
Looking for in
Impact Measurement? pg 25
What are Investees or
Social Enterprises Looking
for in Impact Measurement? pg 28
Exploring Impact
Measurement Frameworks pg 30
Characteristics of
Effective Impact
Measurement Frameworks pg 32
Exploration of the
Existing Approaches pg 34
Conclusion pg 47
Appendices pg 48
Contents

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Impact Measurement:
Exe
Sum
Exe
Sum
Exe
Sum

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Impact Investing
ecuti
mma
The need for philanthropic funds and
government support to address social and
environmental challenges continues to grow,
at a time when both funding sources are
strained. It is a global problem that requires new
approaches to sourcing finance in innovative,
sustainable ways.
Impact investment is one such approach.
Impact investments are investments made
with the intention of having a social and/or
environmental impact, as well as generating
a financial return. They have the potential to
transform the social marketplace in Australia.
In this report, we explore impact measurement
in relation to impact investments, from an
investor and investee perspective, with the aim
of stimulating discussion about the development
of shared measurement frameworks.
Developing the same level of rigour and
robustness into impact measurement as you
would see in financial reporting will encourage
more capital, assist to identify opportunities
to increase impact and help to understand the
concerns of stakeholders.
Impact measurement has broad application and
is rising in prominence in the social sector. While
there is a focus on investors and government
requirements, service providers in the not-for-
profit sector have also called for their needs and
those of their beneficiaries to be reflected in
measurement models.
Building measurement into the investment
process ensures the clarification of not just
financial returns but also the social impact
expectations. By identifying expected returns
and impact early in the process, measurement
and reporting post investment are more
straight forward.
Intention and measurability are two key aspects
that differentiate impact investment from
traditional investments. It follows then that
effective measurement is critical to the success
of impact investment.
Investors tend to be the primary audience
for impact measurement, however there is
significant value for investees to have well
developed, practical measurement systems.
This helps to drive business improvement
opportunities and supports attraction of
future investment.
Several well-recognised measurement
frameworks, approaches and tools exist and
are used by investors and investees to measure
social and financial return, and provide useful,
valuable reporting. For this report, nine of these
approaches have been identified and analysed
using a set of characteristics that we believe an
effective framework must have.
Leveraging the eight characteristics the Group of
Experts of the Commission on Social Enterprise
(GECES) identified we have proposed six key
characteristics that we believe impact investors
and investees require from an effective social
impact measurement framework.
These are that it must be:
• Cost effective; it should be relatively
inexpensive to implement and maintain.
• Well recognised; users need to be certain that
they can trust the results of a measurement
system, being well recognised, it provides
evidence that a social measurement system
is relevant.
• Clear and concise; it should endeavour to
be as user friendly as possible. Includes the
elimination of jargon, excellent documentation
of frameworks and standardised
output format.
• Relevant; refers to the ability of the
measurement system to meet both external
and internal user’s needs.
• Comparable; between time periods and similar
organisations or impact areas.
• Easily implemented; includes the time spent
on training and infrastructure (relating to data
collection and information systems required).
As part of this report we explore nine well
recognised approaches that are relevant to
measurement for impact investing. What is clear
is there is a need to explore how we can bring
together elements of standardised operational
measurement with an understanding of
the industry or sector specific social or
environmental impact an investment may have.
Opening up private capital for public good
unleashes the creativity and productivity of the
marketplace and the passion and insight of the
not-for-profit sector, allowing for social change
to occur at a faster pace and greater scale.
The opportunity for investors to realise financial
and social returns will only be further enhanced
by underpinning the sector with robust
measurement frameworks and targeted,
useful reporting.
Executive
Summary
ecuti
mmaecuti

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Impact Measurement:
Intr
uct
Intr
uct
Intr
uct

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Impact Investing
In this report, we introduce the discussion on
impact measurement in relation to impact
investment, from an investor and an investee
perspective. It leverages the ongoing work of
the partnership between TDi, NAB and Benefit
Capital as practitioners and is aimed to be
a discussion starter for those interested in
the sector.
Measurement is fundamental to understanding
the social or environmental impact that an
investment may have. Without measuring the
impact, the investment has little to differentiate
it from a traditional, profit-focussed investment.
Our belief is that impact investment, as an
intentional lens on all investment opportunities,
combined with appropriate measurement and
reporting of social outcomes is key to unlocking
private capital for public good.
As the number of impact investments increase
so does the need to ensure a consistent and
effective approach to measuring the impact.
A consistent measurement approach has the
potential to enable investors to understand
what, and how much of an impact an investment
is having when compared to other investments.
When looking to address a particular social
issue, it has the potential to identify which
interventions have the greatest impact on that
social issue.
There is a growing demand for measurement
frameworks and agreed approaches. If impact
investment is to become a significant force for
social change then the social and environmental
performance needs to be measured with
the same level of robustness as financial
performance. This requires an approach that
supports consistency, comparability and the
ability to learn by experience. It must also be
flexible in order to allow for investments that
will sit along a spectrum of sizes and
investment types.
The report briefly introduces impact investment
and impact measurement with a discussion on
what is important to the different stakeholders
involved in investment. It then proceeds to
take a look at a nine existing measurement
frameworks, approaches and tools to better
understand how they could be applied to
developing a consistent approach.
While this is by no means the most
comprehensive listing of approaches, TDi, NAB
and Benefit Capital see this as the beginning
of an ongoing discussion. It is about sharing
what we have learnt so far along our impact
investment journey and inviting the broader
community to join us in exploring this
important subject.
Introduction
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tion
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Impact Measurement:
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1
https://www.gov.uk/government/groups/social-impact-investment-taskforce
2
Measuring Impact: Guidelines for Good Impact Practice, Impact Measurement Working Group of the Social Impact Investment Taskforce, Sept 2014. p.2
3
https://iris.thegiin.org/us-sba-endorses-impact-measurement
4
http://www.socialprogressimperative.org/data/spi
This report has been written in the context of
current international and local developments
to measuring social impact and outcomes of
impact investments. There has been a significant
amount of activity relating to the development
of impact measurement, this first section of the
report takes a brief snapshot of current activities.
International
In June 2013, the Social Impact Investment
Taskforce was established at the G8 Summit
in London. The aim of the taskforce is to
catalyse the development of the social impact
investing market.1
The Taskforce recognises the critical role of
measurement in demonstrating the social and
environmental impact of these investments and
has “established the Impact Measurement Group
(Working Group) to facilitate the development
of this practice across the impact investing
marketplace.”2
The Working Group released
Measuring Impact: Guidelines for Good Impact
Practice in September 2014 which provided an
articulation of best practice for measurement in
relation to impact investment.
The Rockefeller Foundation and other early
adopters have funded many of the building
blocks in the market that seek to address
the issue of measurability. These include
Global Impact Investing Network (GIIN) and
the development of Impact Reporting and
Investment Standards (IRIS) performance metrics,
B Labs and the development of Global Impact
Investing Ratings System (GIIRS) and B Analytics.
The growing acceptance of these approaches
can be seen in examples, such as the
announcement by the U.S. Small Business
Administration (SBA) in September 2014 that
fund managers applying to the SBA’s newly
expanded Impact Investment Fund “must
commit to measure their social, environmental
or economic impact using an assessment system
based on The Global Impact Investing Network’s
Impact Reporting and Investment Standards.”3
The above approaches have been complemented
by the release of the Social Progress Index, an
aggregate index of social and environmental
indicators that captures three dimensions
of social progress: Basic Human Needs,
Foundations of Wellbeing and Opportunity.
The Social Progress Index states that to “…
truly advance social progress, we must learn to
measure it, comprehensively and rigorously. The
Social Progress Index offers a rich framework
for measuring the multiple dimensions of social
progress, benchmarking success, and catalysing
greater human wellbeing.”4
The increasing focus internationally on Social
Impact Bonds (SIBs), given the payment by
outcome component, demonstrates the
importance of non financial measurement being
a critical feature of the financial structure of
particular investments.
The
International
and Local
Context

Impact Investing
9
5
Criterion have held five conferences and two masterclass series focused on the area of social outcomes measurement in Australia over the last two years.
6
Criterion Conferences in partnership with SIMNA ran the inaugural Impact Measurement Awards in February 2014 with over 130 applications.
The Awards will be held again in 2015 by Criterion with SIMNA running a separate awards ceremony in November 2014.
7
The Compass: http://csi.edu.au/compass-your-guide-social-impact-measurement/7
The Compass: http://csi.edu.au/compass-your-guide-social-impact-measurement/
Local
In Australia, the growing interest in
measurement is seen through the significant
demand for conferences and networks focused
on impact measurement. Five conferences
focused on social outcomes measurement have
been held in Australia over the last two years,
attended by close to 800 participants seeking to
better engage with impact measurement.
The Social Impact Measurement Network
Australia (SIMNA) has 800 members in state
chapters across Australia.5
There are also local
conferences and events exploring overlapping
topics such as impact investment and
collective impact.
These platforms provide a great opportunity for
shared learning and building of knowledge, and
we have also seen the introduction of awards
that specifically encourage organisations that
have begun their measurement journey.6
The
inaugural Impact Measurement Awards (IMAs) in
February 2014 had 130 applications.
Simple guidance that provides step-by-step
instructions on how organisations should
approach impact measurement has been
needed in the marketplace. The Centre for Social
Impact released The Compass7
in 2014 to help
unpack the complexity and range of alternative
pathways organisations can take if they want to
measure their social impact.
These events have placed a strong focus on
the role of funders (both government and
philanthropic) and the competing wishes
between these groups and the organisations
delivering services to beneficiary groups. The
social sector in Australia is in the early stages
of embracing the potential of both impact
measurement and impact investment.

Impact Measurement:
10
Impact investment has the potential to inject
new resources into social disadvantage that
would otherwise be unavailable, and transform
the social marketplace in Australia.
The Social Impact Investing Taskforce report
released in September 2014 stated:
The world is on the brink of a revolution in
how we solve society’s toughest problems.
The force capable of driving this revolution
is ‘social impact investing’, which harnesses
entrepreneurship, innovation and capital to
power social improvement.8
This section provides a brief introduction to
impact investment. Much has been written on
the subject yet given the multitude of different
understandings we felt it was important to
step through this before delving into impact
measurement and the different frameworks.
Impact
Investment
8
Impact Investment: The Invisible Heart of Markets, Harnessing the power of entrepreneurship,
innovation and capital for public good. Social Impact Investment Taskforce, 15 September 2014. p.1

Impact Investing
11
Impact investment has been described as
investments “that intentionally target specific
social objectives along with financial return
and measure the achievement of both.”9
The
Global Impact Investing Network (GIIN) defined
it as “investments made into companies,
organizations, and funds with the intention to
generate measurable social and environmental
impact alongside a financial return.”10
Antony Bugg-Levine and Jed Emerson captured
the underlying drive for impact investment
in their statement that “…the heart of the
movement is the reorientation around blended
value as the organizing principle of our work:
using capital to maximize total, combined value
with multiple aspects of performance.”11
There are many ways we can describe the impact
investment approach to business. One key
aspect is that it is not Corporate Responsibility,
nor is it about compromising on either the social
and environmental goals or on the financial
return required. Instead, it combines these goals
to create the desired outcome of blended value.
Blended value has an important role in taking an
effective approach to impact investment:
“If impact investing is what we do, blended value
is what we produce. Value is what gets created
when investors invest and organizations act
to pursue their mission. All organizations, for-
profit and non-profit alike, create value that
consists of economic, social and environmental
components. All investors, whether market rate,
charitable, or some mix of the two, generate
all three forms of value. But somehow this
fundamental truth has been lost to a world that
sees value as only being economic (created by
for-profit companies) or social (created by non-
profit organizations or government). And most
business managers, as well as investors, miss
out on the opportunity to capture their total
value potential by not managing for blended
value on an intentional strategic basis.” 12
What is Impact
Investment?
9
Impact Investment: The Invisible Heart of Markets, Harnessing the power of entrepreneurship,
innovation and capital for public good. Social Impact Investment Taskforce, 15 September 2014. p.1
10
Global Impact Investing Network website, http://www.thegiin.org/cgi-bin/iowa/resources/about/index.html
11
Impact Investing: Transforming How We Make Money While Making a Difference, Antony Bugg-Levine and Jed Emerson, 2011.
12
Impact Investing: Transforming How We Make Money While Making a Difference, Antony Bugg-Levine and Jed Emerson, 2011.
To better understand what impact investment is,
it is useful to understand what it is not. Impact
investment is not a:
• Grant -
A grant is usually provided without the
expectation or requirement of a financial
return, however impact investment refers to
placing capital in an organisation with the
expectation of a financial return.
• Specific Asset Class -
Rather than view impact investment as a
specific asset class, it is more accurate to view
impact investment as a lens through which we
can see all asset classes. The lens approach
also prevents a narrow understanding of
grouping all impact investments in one
category and expecting there to be common
risk return profiles for these investments.
When investing in different asset classes with
an impact investment lens, the risk return
profile is that of the particular investment.
• Negative Screen -
Choosing investments by ruling out those
doing societal or environmental harm, was an
entry-level activity for ethical investors in the
early days of the movement, and for some it is
still the main approach in ethical investment.
However it doesn’t take a proactive, or
intentional, approach to choosing what to
invest in.

Impact Measurement:
12
13
Spotlight on the Market: The Impact Investor Survey, J.P.Morgan and GIIN02 May 2014.
14
Impact Investment: The Invisible Heart of Markets, Harnessing the power of entrepreneurship, innovation and capital for public good.
Social Impact Investment Taskforce, 15 September 2014.
15
Charlton, K., Donald, S., Orminston, J. Seymour, R. (2014). Impact Investments: Perspectives for Australian Charitable Trusts and Foundations. p15
Figure 1: An Emerging Impact Investment Spectrum15
Financial Capital Philanthropy
Mainstream ESG Strategies
Established • Screening:
negative
positive or
normsbased
• Sustainability
themes
• Corporate
engagement
and
shareholder
advocacy
• ESG Integration
Impact Investment
Financial First
(or Thematic)
Impact-First
Competitive Financial Return
Competitive Social Return
Finance Only Impact Only
Limited or no focus
on ESG factors
of underlying
investments
Focus on ESG risks and
opportunities
Focus on one
or a cluster
of issue areas
where social or
environmental
need creates
a commercial
growth
opportunity for
a market-rate
or marketing
returns
Focus on one
or a cluster
of issue areas
where social or
environmental
need requires
some financial
trade-off
Focus on one or
a cluster of uses
areas where social
or environmental
need requires 100%
financial trade off
At the heart of impact investment is that
positive social impact must be the intention
and not something that happens ‘after the
fact’. Danny Almagor, a prominent Australian
impact investor, uses an apt story to illustrate
this: “If you’re walking down the street and
you drop one hundred dollars and a homeless
person picks it up… I’m not going to call you
a philanthropist!”
Impact investment is gaining ground
internationally. Research undertaken by
J.P.Morgan and GIIN demonstrates that 125
leading impact investors, who together manage
a total of USD$46bn in impact investments
today, are forecasting 20% growth in the
number of deals this year.13
International banks like Triodos have had impact
investment as a core part of their business
and demonstrate that blended value can be
generated with this approach.
Bringing impact investment to the mainstream
requires a paradigm shift in capital market
thinking, from two-dimensions to three. By
bringing a third dimension, impact, to the 20th
century capital market dimensions of risk and
return, impact investing has the potential to
transform our ability to build a better society
for all.14
An important aspect of impact investment is that
it can happen across a spectrum of investment
opportunities and is placed in a range of
organisations and funds. Some of the more
common are detailed below.

Impact Investing
13
16
Delivering on impact: the Australian Advisory Board breakthrough strategy to catalyse
impact investment, Addis R, Bowden A, Simpson D. Australia: Impact Investing Australia, 2014.
17
The Five Features of an Investable Social Enterprise, Bessi Graham, The Difference Incubator, 2014
Currently the pipeline of opportunities for
impact investment, particularly in the Australian
context, is limited for a number of reasons.
This includes the fact that many social service
providers have traditionally sourced funding
through grants and thus have little experience
developing and managing revenue generating
entities. Governance structures are also an
issue that is compounded by the lack of strong
business and financial skills where they are
needed the most. This has resulted in there
being a significant lack of readily scalable
enterprises able to take on investment capital.
The Australian Advisory Board on Impact
Investing has called for $10-$20 million to be
used ‘for advice to equip social organisations
to attract finance and secure contracts’.16
With the availability of funds through vehicles
such as the NAB Impact Investment Readiness
Fund and the capacity building work of
groups like The Difference Incubator (TDi) it is
hoped that this will begin to stimulate further
investment opportunities.
There is a
Need for
Catalytic
Funds in
the Impact
Investment
Sector
Ultimately this work aims to develop investable
social enterprises to bridge the gap for investors
between social and financial returns. Investable
social enterprises are characterised by having a
social or environmental mission, a commercially
viable business model, sound track record, a
passionate and capable management team, and
a willingness to be held accountable for social
and financial returns.
Figure 2: The Five Features of an Investable
Social Enterprise ISE17
ISE
Social or
Environmental
Mission at its Core
Track
Record
Commercially
Viable Business
Model
Passionate
and Capable
Management Team
Willingness to be
Held Accountable
for Social and
Financial Returns

14
Impact Measurement:
18
Impact Investments: Perspectives for Australian Charitable Trusts and Foundations, Kylie Charlton, Scott Donald, Jarrod Ormiston and Richard Seymour (March 2014), p.11.
Impact
Investment
is an
Opportunity
to Leverage
Philanthropic
Funds
Traditional philanthropy (ie grants), typically
come from the earnings on investments in
capital markets that may not apply a negative
screen when allocating investments, there can
be some dissonance between the source of the
funds and the social or environmental cause
they are allocated to.
This dissonance is reduced by shifting the
investment strategy and leveraging funds for
capacity building in the impact investment
sector whilst also reducing the risk. This has the
potential to dramatically increase the positive
social impact they have in society. Impact
investing provides the opportunity for the effect
of an investment to be amplified by generating
a financial return whilst also providing a
social return.
Figure 3: Tool to Amplify Impact18
An approach that uses catalytic grants focused
on capacity building and de-risking future impact
investments not only opens up opportunities
for philanthropy to increase the potential
impact but it also helps to strengthen the future
pipeline of investment opportunities. This would
help to open up impact investment to new
capital in mainstream markets.
Grants Grants Impact
Investments
Catalytic
Grants
Catalytic
Impact
Investments
New Capital

15
Impact Investing
Payment by
Outcomes
and Social
Impact Bonds
Whilst impact investment can take many forms,
social impact bonds (SIBs) or social benefit bonds
have gathered a significant amount of interest.
In particular it is relevant to understand their
relationship to payment by outcomes.
Payment by outcomes is an innovative
rethinking of the way that social services are
contracted, moving the emphasis from only
paying for inputs or outputs, to payment for
articulating and achieving a desired outcome.
Many organisations cannot finance the work
required to produce an outcome before
receiving payment so a social bond acts as a
permissible finance mechanism to facilitate
the work, spreading the risk of non-delivery
with investors.
Social Impact Bonds (SIBs), or social benefit
bonds are made up of two components:
• A payment by outcome, and
• A financing mechanism that enables an
organisation to produce the outcome, and
thus receive payment.
Bonds in most instances can be thought of
as a loan to the organisation, often with
an interest rate that is proportional to how
well they perform. So while the finance
component is relatively uncomplicated, the
measurement, monitoring and evaluation of
the outcomes can be complex and difficult.
Measuring the outcome and results attributable
to service delivery requires rigorous design
and innovation.
The Impact Measurement Group that formed
out of the Social Impact Investment Taskforce
identified that measurement needs to be
proportional to the available resources, scale
and stage of maturity of both the investors
and investees:
“…payment-for-success structure or social impact
bonds often require third-party assurance and a
valuation of social outcomes. In contrast, many
earlier-stage investees don’t require or don’t
have the resources for third part assurance; thus,
impact measurement goals for these investees
should simply focus on establishing enough
metrics to meet the reporting bar and only
move to third-party assurance when capacity
is available.’19
Recent work by Social Outcomes suggests many
state governments are focusing on building
capability through payment by outcomes
approaches, rather than issuing bonds.20
This
approach requires defining ‘meta outcomes’
and ‘sub outcomes’ and understanding
the complexity in the relationship between
these outcomes when designing a contract
for outcome.
Further effort is required to develop an
evaluation framework that moves away from
output measurement and has the flexibility
for redesign as service providers deliver. This
framework development involves a cluster
of providers and recognises the relationships
between them. Developments such as this will
help to strengthen and broaden the reach of
payment by outcomes approaches.
19
Measuring Impact: Subject paper of the Impact Measurement Working Group, Social Impact Investment Taskforce, Sept 2014. p.9.
20
http://socialoutcomes.com.au/collaborating-for-better-outcomes/

Impact Measurement:
16
The relationship between payment by outcomes and SIBs is illustrated in the Commissioning
Outcomes Continuum developed by Social Outcomes.
21
Commissioning Outcomes Continuum, Sandy Blackburn-Wright, Social Outcomes, 2014. http://socialoutcomes.com.au/change-is-hard-what-will-a-shift-to-outcomes-mean/
Figure 4: Commissioning Outcomes Continuum21
Risk, return and measurement complexity increase with movement along the spectrum from left
to right. Measurement of investment impact at the outcome end of the spectrum is relatively
straightforward however complex social impact bonds require more sophisticated,
time-consuming measurement.
Contracting for
Outcomes
Payment for
Outcomes with
Working Capital
Payment for
Outcomes Without
Working Capital
Social
Impact Bonds
• Upfront Payment
• Suitable for Small
Providers
• Risk Retained by
Government
•Option for Small
Performance
Incentive Only
• Staggered
Payment Option
• Working Capital
Loan Taken by
Provider After
Debt Repaid
• Suitable for
Medium and
Large Providers
• Staggered Payment
Option
• No Capital Needed
by Provider
• Risk Shared with
Provider
• Return and
Incentives Retained
by Provider
• Suitable for
Large Providers
• Payment on
Achievement
of Outcomes
• Suitable for Large
Providers
• Risk Carried
Primarily
by Provider
• Risk Adjusted
Return and
Performance
Incentive Shared
Between Provider
and Investors
Commissioning Outcomes Continuum

Impact Investing
17
The Impact
Investment
Process
Clarifying the financial return and social
impact expectations upfront and ensuring
the prospective investment aligns with these
expectations is critical for an impact investment.
By identifying expected returns and impact early
in the process, measurement and reporting post
investment are more straightforward. We see
there being a four stage process that supports
effective impact investment, this is illustrated in
the diagram below.
Figure 5: Steps to an Impact Investment
Step one:
In determining the viability of an investment,
the investor needs to go through a process
of due diligence to assess the potential of the
opportunity to deliver blended value through
social and financial returns. By identifying the
potential for a financial return, it is clear that
the opportunity is truly an investment and not a
grant with no expectation of a return.
The criteria and thresholds for viability will
differ from investor to investor, depending on
their risk profile and areas of impact interest.
Accordingly, step one calls for assessment and
alignment of financial expectations.
Step two:
Understanding the social or environmental
intent of the investment, the investee will need
to demonstrate how it delivers impact. Clear
articulation of desired social and environmental
outcomes will assist the measurement step.
These first two steps require time and resources
and often result in expectations and terms
to arrive at a point of agreement between
parties. If an investment has very strong social
and environmental returns apparent, but the
financial returns are not present, the investor
should not proceed.
Steps Three and Four:
Once the investment occurs there is a need
for measurement of the financial and social
outcomes. This last step should be straight
forward if the rationale and expectations
established in the first two steps are clearly
documented. If this is not the case, the investor
will have more difficulty assessing the social
impact of their investments.
Step 1
Determine whether it is a financially
viable investment
Step 2
Identify the Desired Social Intent and
Measurement Framework
Step 4
Measure the Financial and the
Social performance
Step 3
Make the Investment

18
Impact Measurement:
Building
Measurement
Into the
Business
Model
for Social
Enterprises
TDi have developed a measurement framework,
building on the Investable Social Enterprises
(ISEs) model. The framework seeks to remind
organisations that even without the presence
of a formal financial tool, such as a Social
Impact Bond, organisations in the social sector
are being paid for outcomes in all of the work
they do.
Whether engaging primarily with philanthropic
or government funding or moving into the
impact investment space, an organisation
delivering products or services in the social
sector is being engaged because of the social
outcomes it achieves through its activities.
22
Business Model Generation, Alexander Osterwalder and Yves Pigneur, 2010. http://www.businessmodelgeneration.com/canvas/bmc
23
TDi’s Overarching Measurement Framework, Paul Steele and Bessi Graham, The Difference Incubator (TDi), 2013.
Figure 6: TDi’s Overarching Measurement Framework23
The framework is based on a foundation of
the business model canvas22
and positions the
intention as a central influencing feature for all
aspects of the business. The framework captures
basic inputs and outputs as well as the outcomes
that drive revenue in a payment by outcomes
approach. TDi’s framework incorporates a mix
of narrative and data to communicate results
and the human elements of transformation that
occur through the organisation’s involvement.
Key Partners Key
Activities
Value
Proposition
Customer
Relationships
Customer
Segments
Key
Resources
Channels
Cost Structure
Context
Input Intention Outputs Outcomes
Revenue Streams

19
Impact Investing
Impact
Measurement
As identified, intention and measurability are
two crucial elements of impact investment.
While intention is the key to both ethical
investing and impact investment, it is
measurability that sets impact investment
apart and creates opportunity for leverage.
The importance placed on measurement by
impact investors and the level of detail required
varies across the sector and many are still
exploring their measurement needs in this
emerging area. There is a strong reliance on the
organisation being invested in and its ability
to provide basic information on the social or
environmental outcomes.

Impact Measurement:
20
What is
Impact
Measurement?
24
Based on Measuring Impact: Subject paper of the Impact Measurement Working Group, Social Impact Investment Taskforce, Sept 2014. p.2.
Impact measurement has broad application
and is rising in prominence across the social
services sector. While there is a focus on
investors and government requirements, service
providers have also called for their needs and
those of their beneficiaries to be reflected in
measurement models.
If impact investment is to become a significant
force for social change then the social and
environmental performance needs to be
measured with the same level of robustness
as financial performance. To do so, would
encourage more capital, but also assist to
identify opportunities and understand the
concerns of stakeholders.
The Impact Measurement Working Group of the
Social Impact Investment Taskforce identified
three outcomes of good impact measurement:
1. The ability to generate value for all
stakeholders in the impact investing
ecosystem. This outcome goes beyond a
simplistic focus on the needs of the investor
and instead drives at ensuring value creation
for investors, investees and beneficiaries.
2. The potential mobilisation of greater capital
into areas of positive social impact creation.
3. Increased transparency and accountability for
delivering on the intended area of impact.24
The Group produced a measurement guideline
below that mirrors the impact investment
process discussed earlier, to help investors
understand the processes required to
incorporate impact measurement into the
impact investment process.

Impact Investing
21
25
Figure 7: The Seven Guidelines25
Guideline Description
Plan Set Goals Articulate the desired impact of the investments.
Establish a clear investment thesis/Theory of Value Creation (ToVC) to form
the basis of strategic planning and ongoing decision making and to serve as a
reference point for investment performance.
Develop Framework
Select Metrics
Determine metrics
Establish a clear investment thesis/Theory of Value Creation (ToVC) to form
the basis of strategic planning and ongoing decision making and to serve as a
reference point for investment performance.
Do Collect Store Data Capture and store data in a timely and organized fashion
Ensure that the information technology, tools, resources, human capital and
methods used to obtain and track data from investees function properly.
Validate Data Validate data to ensure a sufficient quality
Verify that impact data is complete and transparent by cross-checking calculations
and assumptions against known data sources, where applicable.
Assess Analyse Data Distill insights from the data collected
Review and analyse data to understand how investments are progressing against
impact goals.
Review Report Data Share progress with key stakeholders
Distribute impact data coherently, credibly and reliably to effectively inform
decisions by all stake holders.
Make Data-
Investment
Management
Decisions
Identify and implement mechanisms to strengthen the rigor of investment
process and outcomes
Assess stakeholder feedback on reported data and address recommendations to
make changes to the investment thesis or ToVC.

Impact Measurement:
22
26
Proposed approaches to social impact measurement in European Commission Legislation and in practice relating to: EuSEFs and the EaSI. 2014.
27
Adapted from GECES Sub-group on Impact Measurement.
28
Muir, K. Bennett, S. (2014). The Compass: Your Guide to Social Impact Measurement. Sydney, Australia: The Centre for Social Impact.
The process of measurement can be viewed as
cyclical, once at the review stage this can then
inform future investment decisions and help
management improve performance and increase
the potential impact of future investments.
The Group of Experts of the Commission on
Social Entrepreneurship (GECES) Sub-group
on Impact Measurement identified five stages
in the process of measuring and managing
impact, as shown in Figure 8.26
The five stages,
similar in process to that outlined above by the
Impact Measurement Working Group of the
Social Impact Investment Taskforce highlight a
continuous cycle of objective setting, measuring
and learning to improve the quality of impact
measurement and ultimately impact investment.
Figure 8: Adapted Five-Stage Process of
Managing Impact with Investment27
2.Analysing
Stakeholders
5.Report,
Learn and
Improve
4.Measure
Validate
and Value
3.Setting
Measurement
1.Setting
Objectives
An important part of the measurement process
is identifying what will be measured. Both
investors and investees need to be aware
of how impact is measured and the variety
of indicators that can be used to do this.
The difference between measuring outputs,
outcomes and impact needs to be clear for
any given investment. To go beyond reporting
on outputs investors and investees will need
to explore the development of a theory of
change for the particular investment and how
it will address/have its social or environmental
impact measured.28

Impact Investing
23
Figure 9: Financial Quantification Across the Impact Value Chain29
29
A model developed by
the Impact Measurement
Working Group helps
identify qualitative,
quantitative and financial
measures across the impact
value chain. This model is
useful for investors and
investees to guide what
types of measurement data
should be sought across the
value chain.
Illustrative Examples
Qualitative Description
of inputs
Description
of activity
Description
of outputs
Case studies
describing
outcomes
Qualitative
evaluation of
impact
Quantitative Volume
of non-
financial
inputs
Volume
of activity
delivered
Numbers
of outputs
delivered
Outcomes
measured
using
quantitative
indicators
Impact
measured
using robust
measurement
framework
Financial Financial
value of
incoming
resources
Cost of
activity
Cost per
output
Cost per
outcome;
societal
financial
value of
outcome
Societal
financial value
of impact
Input Activity Output Outcome Impact

Impact Measurement:
24
30
Measuring Impact: Subject paper of the Impact Measurement Working Group, p.1.
Knowing Your
Audience
There are several audience groups for impact
measurement and reporting that need to be
considered. These include investors, the social
enterprise or investee and funders that will all
have different needs. Within the investor group
itself, there are different types of investors
who will have varying needs in terms of data
and reporting.
Measurement should address expectations
that have been established initially for both
the investor and investee. It is natural that
there will be varying frequencies and content
included in reports provided to the investor
as opposed to that used by management and
internal stakeholders.
Reporting can be enhanced by providing details
about the positive impact of the work delivered
by the social enterprise and the lessons learnt
from their experience to continuously improve
their social impact. Some of this information
may need to be translated or modified to align
with the needs of the investor, such as providing
summary details only, while internal use may
require more depth.
When developing measurement models, it
is useful to keep in mind the role the key
stakeholders play in the impact investment
process, when an outcome focus is applied:
• Capital Providers (both funders and investors)
are paying for an outcome.
• Enterprises/investees as service providers are
delivering outcomes.
• Beneficiaries are benefitting from
the outcomes.
Impact measurement ‘should help impact
organizations manage performance,
learn, improve outcomes, and hold
themselves accountable to those they aim
to serve.’30

Ultimately, the rationale for impact
measurement includes accountability to
investors and internal stakeholders, learning
from performance and generating ongoing
investment opportunities. These need to be
kept at the forefront of any measurement
system development.
The following section explores in more detail
impact measurement in relation to the needs of
investors and investees or social enterprises.

Impact Investing
25
31
A Short Guide to Impact Investing, Case Foundation, 2014.
What are
Impact
Investors
Looking for
in Impact
Measurement?
Impact investors make an intentional decision
to invest in organisations that create a social
or environmental good, as well as a financial
return. While the financial return they make may
be easily quantified, they also need metrics and
qualitative information that provides feedback
on the social impact their investment is having.
The aims of most impact investors are
similar; however there is no single consensus
regarding the most effective methods of impact
measurement.31
The following table illustrates
the three typical investor types and their
needs from impact measurement. What can be
understood from this is that the measurement
requirements relate directly to the need for the
investor to be held accountable to their own
stakeholder groups.
Figure 10: Measurement Requirements for Different Investors
Investor Private Investment Fund or PAF Investor Government
Investment
Measurement
Requirement
• Niche area of
particular interest
• Individual investee
• Value driven
investment
• Need to
demonstrate the
impact to investors
to help determine
resource allocation
• DGR status may
allow some degree
of flexibility
• Objective
demonstration and
evidence to support
resource allocation
Outcome
Measurement
Basic Outputs
Measurement
Complex Outcomes
Measurements(Outcome measurement method will
vary along the scale depending on the
investors preference requirements.)
What this results in is a spectrum of outcome
measurements that will need to be used,
from basic outputs measurement to more
complex, time consuming and costly
outcomes measurements.

Impact Measurement:
26
Before investing, an impact investor will conduct
due diligence. In the event of an investment
performing poorly, the impact investor may
not receive any of the initial investment back.32
Thus, like any other investor, the appropriate
due diligence into the viability of any potential
investment is critical.
In 2014, J.P.Morgan and GIIN found that 80% of
respondents indicated that generating financial
returns is essential and 71% indicated that
determining impact objectives at the time of
investment is essential.33
Evaluation of actual and potential social impact
differentiates the impact investor. This involves
understanding the mission, how their business
model achieves its social objectives and what
metrics are in place to track progress.
Experienced impact investors may request
specific social impact measurement reporting as
a requirement for investment, or they may invest
only in organisations with established impact
measurement systems. Impact measurement
data provides critical feedback to impact
investors and it may be used by an active
investor to recommend improvements.
Measurement data provides feedback on the
impact investor’s own investment process.
Negative social impact can suggest their
investment strategy is failing and requires
review, which may lead to making better
investments and potentially fewer errors in
the future.
32
In search of gamma an unconventional perspective on impact investing, Grabenwarter U, Liechtenstein H. 2010
33
Spotlight on the Market: The Impact Investor Survey, J.P.Morgan and GIIN 02 May 2014.

Impact Investing
27
“Investors want to know what the
objectives are and how they’re being
tracked. There’s not a demand for a
large number of metrics around a
range of different variables. There is
a desire to define what your impact
is going to be and report on that
in a way that’s appropriate. Some
of those things will be measurable
and some of those things will only
be reported in terms of stories and
I think people are still feeling their
way. People want to talk about the
intent of the project, how it will
work, how do we measure that, what
impact is desired and what’s being
done to capture that.”Trevor
Trevor Thomas,
Managing
Director –
Ethinvest,
Sydney Australia.
Australia.

Impact Measurement:
28
What are
Investees
or Social
Enterprises
Looking for
in Impact
Measurement?
Existing and potential impact investors
tend to be the primary audience for impact
measurement, however there is significant value
for investees and social enterprises to have well
developed, practical measurement systems that
ensure effective management of the enterprise.
An investee benefits from impact measurement
because it helps to articulate their area of
impact, it supports effective, useful due
diligence, it aligns accountability with the
measures set, and drives improvement through
learning from results.
Impact measurement plays a critical role in
the due diligence process.34
As with financial
projections in a prospectus, the social impact
projections support the presentation of a
stronger case to impact investors.35
Impact measurement also provides
accountability and feedback after the investment
event. The final two stages identified in the
measurement process; ‘measure, validate and
value’ and ‘report, learn and improve’, are
critical in fulfilling the accountability function
of the investment event and with these in place
there is greater likelihood of their being a
greater impact made by the investment.
Measurement and validation helps to quantify
the value created by the enterprise. It can
also be used by the organisation to measure
achievement of objectives, highlight areas
of strength and identify opportunities for
improvement in operational processes.
34
In search of gamma an unconventional perspective on impact investing, Grabenwarter U, Liechtenstein H. 2010
35
Spotlight on the Market: The Impact Investor Survey, J.P.Morgan and GIIN02 May 2014.

Impact Investing
29
“Simple and clear metrics that
illustrate the impact of the business
while simultaneously being effective
indicators for management to
drive increased effectiveness of
the business both from a financial
and impact viewpoint. The
metrics chosen should be effective
management tools not burdensome
reporting requirements.”
Kylie Charlton,
Chief Investment
Officer,
Australian Impact
Investments, and
Co-Founder of
Unitus Capital.

30
Impact Measurement:
Exploring
Impact
Measurement
Frameworks
Up to this point we have focussed on setting the
background to underscore the importance of
impact measurement to impact investment. We
have also highlighted the diverse measurement
needs of stakeholders involved in impact
investing and the lack of a common consensus
on the best measurement approaches. This
next section identifies some of the relevant
existing frameworks, approaches and tools that
could be used to assist with measuring impact
for impact investments. We have started quite
broad with our exploration as we believe that
each approach included has characteristics that
may provide insights or value to the potential
development of a comprehensive framework.
A spectrum of approaches exist that have
been evolving as interest and expertise grows
in understanding what and how to approach
measurement for impact investing. The Impact
Measurement Working Group published the
Market Evolution Spectrum which illustrates
the placement of some of these measurement
systems developed in relation to each other and
for the purpose of impact investment. It also
proposes that these approaches will move from
an emergence phase through to standardisation
and integration as the market develops.
What is evident is that the emergence
approaches are mostly organisationally
focused while convergence and standardisation
approaches focus on global or shared measures.
Integration is the longer term aim, where
measurement is integrated into other well-
recognised standards such as the International
Financial Reporting Standards (IFRS).
xplo
mpa
Exp
Imp
xplo

31
Impact Investing
Figure 11: Market Evolution Spectrum36
36
Spectrum of
Measurement
Approaches
Organi-
sational
Guidelines
(Private)
Organi-
sational
Guidelines
(Shared)
Issue
Regional
Guide-
lines
(Optional)
Global
Guidelines
(Optional)
Standards
(Optional)
Standards
(Required)
Formalised
Reporting
Disclosure
Regimes
Illustrative
Measurement
Approaches
Endeavor
Impact
Assessment
Dashboard
Sonen
Capital’s
Impact
Measurement
Approach
Acumen’s
BACO
Methodology
Gates,
Hewlett
Rockefellar
Fdn Impact
Measurement
Principles
IFC’s DOTS
Framework
EU
Standard
(GECES)
EVPA
Guidelines
NPC’s
Guidelines
Social Return
on invest-
ment (SROI)
Methodol-
ogy
UNGC
Reporting
Guidelines
International
Integrated
Reporting
Framework
IRIS Metrics
Global
Impact
Investing
Ratings
System
(GIIRS)
Sustainability
Accounting
Standards
Board (SASB)
Illustrations from analog
markets (no impact
examples available):
Interna-
tional
Financial
Reporting
Standard
(IFRS)
U.S
Generally
Accepted
Accouting
Principles
(GAAP)
Security
Regulation
(SEC, others)
Disclosure
regimes (incl.
Evolving
non-financial
reporting
require-
ments,
the EU
Directive)
To begin the process of understanding how
different approaches could be useful, we
conducted a market scan to identify a selection
to explore. We limited the scope to include
only the more well-recognised approaches –
those that are already currently being used by
organisations in Australia and internationally.
Our market exploration concentrated on the
following nine approaches:
• Environmental, Social, Governance (ESG)
• Global Impact Investment Report System
(GIIRS)
• Global Reporting Initiative (GRI)
• Impact Reporting and Investment Standards
(IRIS)
• London Benchmarking Group Model (LBG)
• Results Based Accountability (RBA)
• Social Enterprise Balanced Scorecard (SEBS)
• Shujog Impact Framework and Impact Mark
(SIF)
• Social Return on Investment (SROI)
All are globally recognised and are being
implemented by organisations of various sizes.
Emergence Convergence Standardisation Integration
Near-term Focus Longer-term Focus

Impact Measurement:
32
Once having completed the market scan we
then analysed each approach to identify its
relevance to impact investment. Taking the
GECES model37
as a guide we have established
the following criteria we see as being required
for effective impact measurement frameworks.
They should be:
1. Cost Effective –
The framework should be relatively
inexpensive to implement and maintain.
2. Well Recognised –
The framework should be approved by
impact investors, social enterprises and
other stakeholders.38
Users need to be
certain that they can trust the results; being
well recognised and widely used assists to
ensure it is familiar to stakeholders. This
incorporates the GECES ‘understood and
accepted’ characteristics.
3. Clear and Concise –
An framework should endeavour to be as
user-friendly as possible. This includes the
elimination of jargon, documentation of
the framework and standardised outputs.
Ideally an output should be concise – a user
should immediately be able to understand
the output. This incorporates the ‘simple’,
‘certain’ and ‘transparent and well-
explained’ characteristics.
4. Relevant –
Refers to the frameworks ability to meet
both external and internal user’s needs. This
incorporates the ‘relevant’, ‘helpful’, ‘natural’
and ‘founded on evidence’ characteristics.
5. Comparable –
This is the ability of the framework to facilitate
comparisons between similar organisations
and across time periods.
6. Easily Implemented –
This addresses non-monetary costs of
implementing a framework. This includes
time spent on training, infrastructure in
terms of data collection and information
systems required.
Characteristics
of Effective
Impact
Measurement
Frameworks
37
Proposed approaches to social impact measurement in European Commission Legislation and in practice relating to: EuSEFs and the EaSI. 2014.
38
Social Return on Investment: lessons learned in Australia, Social Ventures Australia Consulting. Australia: 2012.
Figure 12: Key Characteristics of Effective
Impact Measurement Frameworks
Easily
Implemented
Cost
Effective
Relevance
Clear and
Concise
Comparable
Key
Characteristics
Well
Recognised

Impact Investing
33
39
How to evaluate a social enterprise? Smit A. Netherlands: NTI University; 2012.
40
Impact Investing’s Three Measurement Tools, Brandenburg M. Stanford Social Innovation Review; 2012.
41
From the margins to the mainstream: assessment of the impact investment sector and opportunities to engage mainstream investors, Drexler M, Noble A.
World Economic Forum, 2013.
42
IImpact Investing’s Three Measurement Tools, Brandenburg M. Stanford Social Innovation Review; 2012.
43
A short guide to impact investing, Case Foundation; 2014, http://casefoundation.org/impact-investing/short-guide
The aim was to ensure we explored the
approaches through the lens of whether they
best meet the needs of the different audience
groups involved in impact investing, specifically
impact investors and impact investees or
social enterprises.
They needed to be practical and applicable in a
real world setting. As such there is the challenge
of balancing resources spent on generating the
greatest social impact versus understanding
the size of the impact. Cost effectiveness will
differ depending on the size of the investment
and the resources available,39
however in some
instances it will be necessary to trade off some
of the criteria listed above for a more cost
effective model.
A critical characteristic sought by impact
investors and investees is that it needs to be
comparable.40
This comparability means:
• For the impact investor – the ability to assess
the social return of an investment against
other similar investments in their portfolio and
inform future investment decisions.
• For portfolio managers - the performance of a
fund in terms of social return can be measured
against other funds,41
and potentially highlight
any reasons for poor performance.
• For the investee or social enterprise -
performance can be tracked over time and
potentially across different parts of the
organisation, against a benchmark so that
improvements or issues can be acted on.
Summarised, the framework must facilitate
comparison between similar organisations
or impact areas and comparison between
time periods. Ultimately a framework that
provides for benchmarking of measures is
highly desirable.42
Some caution in the interpretation of any
framework should be applied to account for
organisational or sector differences that are
inherent to the investee. Impact measurement
should not be seen as a way to take judgement
out of investment decisions by looking solely at
a numerical based representation of a financial
or social return.
It is important to note that we do not expect
to find a one size fits all perfect impact
measurement approach. As the Case Foundation
has noted – a basic framework, as opposed to
a singular, perfect framework, will help more
people manage impact measurement and will
naturally encourage the framework to evolve
and improve over time.43

34
Impact Measurement:
Exploration of
the Existing
Approaches
Our exploration of the nine existing
approaches uses the criteria described above
to understand the relevant elements useful to
impact measurement for impact investing. The
discussion is the opinion of the authors and
does not state that any approach is necessarily
better or worse than each other, but instead we
want to focus on assessing the relevance in the
context of impact investment. It is hoped that
this will provide the basis for further discussion.
An introduction to each of the nine approaches
is provided on the following pages with key
insights from our analysis. This brief summary is
aimed solely as a starter for further investigation.
More work is needed to understand how
the most relevant characteristics of these
approaches can be adapted for use in an impact
measurement framework.
The approaches are listed in the following order:
· Environmental, Social, Governance (ESG)
· Global Impact Investment Report System (GIIRS)
· Global Reporting Initiative (GRI)
· Impact Reporting and Investment Standards
(IRIS)
· London Benchmarking Group Model (LBG)
· Results Based Accountability (RBA)
· Social Enterprise Balanced Scorecard (SEBS)
· Shujog Impact Framework and Impact Mark
(SIF)
· Social Return on Investment (SROI)
Exp
Exis
Exp
Exis
Exp
Exis

35
Impact Investing
plor
istin
plora
stin
lora
sting

36
Impact Measurement:
Environmental,
Social,
Governance
(ESG)
Creator
John Elkington - Co-founder of the business
consultancy Sustainability
Year Created
1998
Overview
Provides overarching guidance to evaluate an organisation’s
operations in terms of three main areas: Environmental, Social
and Governance. The environmental criteria look at how a
company performs as a steward of the natural environment. The
social criteria examine how a company manages relationships
with its employees, suppliers, customers and the communities
where it operates. Governance deals with a company’s
leadership, executive pay, audits and internal controls, and
shareholder rights.
A report card using letter grades (A – F) is constructed to
illustrate how well an organisation performs in each category.
Alternatively, textual analysis of performance in each category
can be produced.44
Target Market
Institutional investors, portfolio investments
Measurement/Process Summary
1. Companies determine applicable metrics in each main area
2. Scoring system is determined
3. Relevant data is collected
4. Report card is produced
Official Website
N/A
Key Insights
Ease of implementation
ESG focuses on environmental, social and governance aspects of
an enterprise. Organisations that implement this measurement
system are required to report performance on all three aspects.
If an organisation does not have metrics already in place for a
particular aspect, operational changes may be required. Training
may be required, information systems improved and data
collection infrastructure developed. Excellent implementation
would ideally reflect industry benchmarks across a number
of metrics, which would serve as the foundation for the
development of grading systems.
Relevance
ESG is similar to SEBC and RBA as management has the ability
to choose their performance indicators. More indicators can be
chosen in areas of concern, reducing the emphasis on areas that
are not within the organisation’s strategic objectives.
44
http://thomsonreuters.com/about-us/corporate-responsibility/esg-performance/

37
Impact Investing
Global Impact
Investment
Report System
(GIIRS)
Creator
B Lab
Year Created
2010
Overview
A comprehensive reporting framework that provides ratings in
4 areas: Community, Environment, Workers and Governance.
Ratings are percentile rankings (and not absolute) rankings
against other organisations. GIIRS is externally assessed
by B Lab and can be used by both social enterprises and
impact investors.45
Target Market
Corporate businesses, public agencies, small to medium
enterprises, non-governmental organisations, industry groups.
1. Fill out online questionnaire on GIIRS website.
2. Complete assessment review – documentation and on-site
3. Receive ratings report
Official Website
http://giirs.org/
Key Insights
Cost Effective
GIIRS is an externally assessed measurement system, with
the cost based on the revenue of the social enterprise being
assessed. The cost of using GIIRS can be as low as $500 for
social enterprises that receive less than $1 million revenue, and
as high as $25,000 for those enterprises with more than $100
million in revenue.
Ease of Implementation
GIIRS ratings are conducted online and can be completed within
several hours.
Clear and Concise
GIIRS’s follows a standardised format with easily understandable
labels and scoring system.46
45
http://www.giirs.org/about-giirs/how-giirs-works
46
Get started - company ratings process, Global Impact Investing Reporting Framework. http://giirs.org/companies/get-rated-companies. How GIIRS flavors impact investing’s
alphabet soup of measurement tools, Busenhart B. CSRWire; 2012.
http://www.csrwire.com/blog/posts/430-how-giirs-flavors-impact-investings-alphabet-soup-of-measurement-tools

38
Impact Measurement:
Sustainability
Reporting
Guideline (GRI)
Creator
Global Reporting Initiative (GRI)
Year Created
1997
Overview
GRI have developed the Sustainability Reporting Guideline which
is a reporting system that provides metrics and methods for
measuring and reporting an organisations sustainability-related
impacts and performance. The report provides a table that
references places where the relevant information can be found,
and can be submitted to the Global Reporting Initiative for
verification and assurance.47
Target Market
Corporate businesses, public agencies, small to medium
enterprises, non-governmental organisations, industry groups.
Organisation discloses where readers can find the required
metric in the relevant documentation. It is up to the
organisation to collect and aggregate the information on
the report.
Official Website
https://www.globalreporting.org/
Key Insights
The Sustainability Reporting Guidelines require a significant
amount of disclosure across several organisational areas. To
implement effectively, significant time, effort, and training is
required to properly understand the framework and reporting
requirements. The disclosure requirements can be complicated,
increasing the cost and time associated with implementation.
Clear and Concise
The outputs generated are not necessarily clear and have the
potential to be confusing to the user. The report produced does
not contain all the relevant information required by the user,
rather it directs the reader to other sources where they can find
the necessary data. Despite these directions, readers may be
directed to error pages or may not be able to find the relevant
information (often due to pages being deleted).
47
Sustainability Reporting Guidelines, Global Reporting Initiative. 2006.

39
Impact Investing
Impact
Reporting
Investment
Standards (IRIS)
Creator
The Global Impact Investing Network (GIIN)
Year Created
2008
Overview
A catalogue of standardised metrics for describing social,
environmental, financial impact freely available to anyone. Can
be used to complement existing measurement systems or used
to design a customised system. Detailed case studies and metric
sets are available for different industries.48
Target Market
IRIS is targeted at both impact investors and enterprises.
1. Identify goals and objectives
2. Pick and choose relevant metrics
3. Convert own framework to fit chosen metrics
4. Collect relevant data
5. Report
Official Website
http://iris.thegiin.org/
Key Insights
Cost Effective
IRIS is a freely available catalogue of metrics that can be drawn
from without charge, making it very cost effective as the only
costs are those associated with maintenance and management
of the data.
Comparability
IRIS metrics that are quantitative offer comparability between
time periods. IRIS metrics are standardised and therefore
facilitate comparability between organisations.
Clear and Concise
The IRIS catalogue gives guidance on how each metric should be
measured and how this relates to an organisation’s impact. The
measures are considered transparent and well-explained.
Relevance
The IRIS framework is recognised for its customisability. This
means that investees and social enterprises are able to choose
specific metrics from the framework that align with their
strategic objective. This greatly increases the relevance of
the framework.49
48
http://iris.thegiin.org/about/faq
49
IRIS frequently asked questions, USA: Impact Reporting and Investment Standards. 2014. http://iris.thegiin.org/about/faq. Why IRIS? Stanford Social Innovation Review. 2012.

40
Impact Measurement:
London
Benchmarking
Group (LBG)
Creator
London Benchmarking Group –
Managed by Haystac in Australia New Zealand
Year Created
1994
Overview
The LBG Model is a measurement of a company’s overall
contribution to the community, taking into account cash, in-
kind donations and management costs. The model also looks
at outputs and long-term community and business impacts of
corporate community investments. The framework combines
quantitative measures with a narrative aspect to demonstrate
social objective progress.50
Target Market
Targeted at community and commercial initiatives.
1. Carefully cost the main inputs to the community
2. Map and measure their consequent outputs
3. Assess the impact of individual components and, where
possible, the whole community program, over various
time periods
Official Website
http://www.lbg-online.net/
Key Insights
Comparability
For LBG to be comparable across different time frames
consistent methodology and reporting must be used. If changes
are made to either reporting or methodology, then LBG cannot
be used to compare data from year to year.
Comparisons with other organisations are limited as most
organisations will have their own reporting methodologies.
The narrative aspect of LBG further compounds this challenge.51
50
http://www.lbg-online.net/about-lbg/the-lbg-model.aspx
51
CR report 2012 basis of reporting, Freshfields Bruckhaus Deringer. 2012.

41
Impact Investing
Results Based
Accountability
(RBA)
Creator
Mark Friedman
Year Created
1996
Overview
RBA focuses on accountability in programs with public aspects,
but can also be used by social enterprises. Users clearly set
goals and objectives, identify metrics that illustrate progress
and gather the relevant data. Data collected is often reported
in visual formats, with accompanying management remarks
and analysis.52
Target Market
RBA is predominantly used by public institutions or programs
e.g. at the community level.
1. Outcomes that clearly articulate what programs are to achieve
2. Indicators to measure whether or not outcomes have
been achieved
3. Performance standards or benchmarks to assess how
programs are progressing
4. Data collection instruments to regularly obtain indicator data
5. Periodic collection and analysis of data for internal decision-
making and public reporting.
Official Website
http://resultsaccountability.com/
Key Insights
Clear and concise
RBA focuses on reporting of performance levels that are
measureable and within a specified timeframe. This allows
comparison against previous periods to determine whether the
organisation has achieved their strategic objective. However,
public reports of RBA data also include a large amount of
qualitative data. This includes stating the audience, reporting
criteria, indicators, goals and objectives. Additional contextual
information may be required to help readers correctly interpret
the reports.
RBA reports are often lengthy which may result in readers
missing useful qualitative data which in turn may lead to
incorrect interpretation of report results.
Relevance
RBA allows organisations the freedom to choose their
performance indicators. This gives management the
ability to choose specific indicators that align with their
strategic objectives.53
52
Overview of Results-Based Accountability: components of RBA, Schilder D. Massachusetts, USA: Harvard Family Research Project - Harvard Graduate School of Education; 1997
[22/10/2014]. Available from: http://www.hfrp.org/publications-resources/browse-our-publications/overview-of-results-based-accountability-components-of-rba.
53
Overview of Results-Based Accountability: components of RBA, Schilder D. Massachusetts, USA: Harvard Family Research Project - Harvard Graduate School of Education; 1997.
Available from: http://www.hfrp.org/publications-resources/browse-our-publications/overview-of-results-based-accountability-components-of-rba

42
Impact Measurement:
Social Enterprise
Balanced
Scorecard
(SEBC)
Creator
Social Enterprise London (SEL)
Year Created
2004
Overview
A framework developed to help social enterprises to clarify and
articulate their strategic objectives, and decide upon methods to
deliver those objectives. Critical elements of strategy are linked
to social and financial objectives.54
Target Market
Non-profit driven organisations
Requires creation of a strategy map by understanding the
following concerns:
1. Financial objectives of organisation
2. Values Proposition – the needs of organisation’s key
stakeholders
3. Internal processes and activities required to meet
stakeholder needs
4. Skills and resources required to complete internal processes
The strategy map is a single page visual representing linking
critical elements of strategy to social and financial objectives.
Objectives in strategy map are linked to metrics. A relevant
timeframe with target objectives is established and is used to
determine whether targets have been achieved at the end of
each specified timeframe.
Official Website
http://www.sel.org.uk/
Key Insights
SEBC requires staff members to learn some basic terms and
concepts, and explore case studies and examples to gain a
better understanding of the system and its implementation
process. Furthermore, the creation of the strategy map requires
additional staff training and time, which may not be achievable
in all organisations. Additional data collection and the
application of new information systems will further increase the
difficulty of implementation.
Relevance
Similarly to RBA, SEBC allows management to determine which
metrics and indicators should be used to measure social impact.
Carefully chosen metrics that align with the company’s strategic
objective will significantly increase relevance.55
54
http://www.proveandimprove.org/tools/socialenterprise.php
55
Proving and Improving, Social enterprise balanced scorecard. 2014. http://www.proveandimprove.org/tools/socialenterprise.php

43
Impact Investing
Shujog Impact
Framework
Impact Mark
(SIF)
Creator
Shujog
Year Created
1996
Overview
The Shujog Impact Framework (SIF) quantifies the total benefits
of a social enterprise, and gives them practical terminology
and numbers to report to funders, e.g. the “social return” on
investment made. The Impact Mark is an endorsement that
signifies that an enterprise has achieved a high level of impact
across the board.56
Target Market
Social enterprises and community organisations, funders
looking to verify impact.
1. Choose relevant metrics for the Impact Framework
2. Set targets and KPIs to monitor (based on the Shujog
Sustainability Pyramid)
3. Collect data and assess performance
4. Compare performance to benchmarks
(Assign Impact Mark if relevant)
5. Continued monitoring and gap analysis
6. Ongoing accountability and verification of impact against KPIs
Official Website
http://shujog.org/magnify-impact/impact-assessment/
Key Insights
Relevance
As with several other measurement approaches, the Shujog
Impact Framework ensures that results remain relevant and
useful for each organisation. Assessments are tailored to each
organisation from the outset, designing it in such a way that the
outcomes measured will be useful for those reading the final
report, particularly those who will make decisions about future
investments. The assessment is also repeated annually, and the
fresh data collected ensures that decisions are made with up-to-
date information.57
56
57

44
Impact Measurement:
Social Return
on Investment
(SROI)
Creator
Roberts Enterprise Development Fund
Year Created
2001
Overview
SROI is a framework used to understand and manage the social,
economic and environmental outcomes created by an activity
or company. It involves assigning monetary values to social
impact generated.58
Target Market
Targeted at social sector organisations.
1. Establish scope
2. Identify stakeholders
3. Map outcomes
4. Assign outcomes
5. Establish impact
6. Calculate SROI
Official Website
http://redf.org/learn-category/sroi/; and
http://www.thesroinetwork.org/
Key Insights
Comparability
SROI is a useful measure for organisations to make internal
comparisons. The organisation must use consistent metrics
between time periods, allowing easy analysis and comparison
of results.
SROI encourages active engagement between stakeholders
and management in determining performance indicators. This
results in a unique set of metrics used by organisations that are
tailored to their specific objectives. This may present difficulties
if comparisons are made cross organisations with different
social impact activities.59
58
Social Return on Investment: exploring aspects of value creation in the nonprofit sector, Emerson J, Wachowicz J, Chun S. United Kingdom: 2000. A guide to Social Return on
Investment, Nicholls J, Lawlor E, Neitzert E, Goodspeed T. Cabinet Office, Office of the Third Sector, 2009.
59
Report on impact measurement highlights importance of the story, Mair V. Civil Society Finance; 2013. http://www.civilsociety.co.uk/finance/news/content/14659/report_on_
impact_measurement_highlights_importance_of_the_story. The ambitions and challenges of SROI, Arvidson M, Lyon F, McKay S, Moro D. 2010.

45
Impact Investing

46
Impact Measurement:
Con
lusi
Con
lusi
Con
lusi

47
Impact Investing
Conclusion Based on our brief analysis, there are
characteristics within each of the nine
approaches that are relevant to a potential
framework for impact measurement. Many
of these elements are complimentary in
that they play a different but useful role.
What is clear is there is a need to explore
how we can bring together elements of
standardised operational measurement with
an understanding of the industry or sector
specific social or environmental impact
an investment may have. At a framework
level there is still a significant focus on
measurement of outputs of the social or
environmental change that has occurred
rather than measuring the actual impact.
To illustrate this, approaches such as the
SROI methodology allow for a granular
understanding of the social impact of a
particular investment, employing theories
of change and detailed measurement of
outcomes. Whilst undoubtedly valuable for
the enterprise or organisation, with little
ability to use this measure to compare against
other programs or interventions there is
little value for an investor who might want
to compare impact across a portfolio of
investments or who needs to understand the
organisational performance of an investment.
On the other end of the spectrum, GIIRS and
IRIS provide a strong framework for rating
the operational elements of an investment or
enterprise. They also allow for the inclusion of
standardised metrics across a range of social
and environmental impacts. Through these
frameworks it is possible for investors and
investees to determine their ranking among
their peer group and track absolute performance
over time. The gap that currently exists is how to
ensure the social and environmental impacts are
measuring impact rather than just outputs.
This is just one aspect of our current
understanding of where the opportunity for
greater collaboration on impact measurement
lies. TDi, NAB and Benefit Capital intend to
continue exploring these approaches and
putting them into practice to learn more about
which frameworks, approaches and tools may
be useful to develop further. We want to engage
with a broad cross section of the sector as we
believe that shared measurement frameworks
and approaches have greater value in making a
long lasting social impact. Ultimately we believe
that it will enable greater flows of capital into
impact investment.
Opening up private capital for public good
unleashes the creativity and productivity of
the marketplace, allowing for social change
to occur at a faster pace and greater scale.
By underpinning the sector with robust
measurement systems and targeted, useful
reporting, the opportunity for investors
to realise financial and social returns is
further enhanced.
nc
ion
nc
ion
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ion

48
Impact Measurement:
Appendices Brief Literature Review
The following articles were used to help
inform our thinking and are a great basis for
anyone looking to delve deeper into impact
measurement for impact investment.
Metrics to Evaluate Your Impact
Investments
Devex Impact
Judith Rodin, Margot Brandenburg
06/05/14
www.devex.com/news/metrics-to-evaluate-your-
impact-investments-83410
This article does a fantastic job of highlighting
the key challenges attached to measuring social
performance, using the real life case of Agua
Natural en Red.
The company clearly has positive social and
environmental benefits, but struggles to
definitively measure them. The authors put
forward a number of practical next-steps for
readers in a similar position, such as B-Corp
assessment and Impact performance analysis.
“While it’s one thing to count the dollars,
another is to put hard numbers on the returns
to society of improved health care or the value
of a healthy tropical forest.
“Take water provision — when investing in this
essential human and natural resource, would
you want to see your returns measured by the
number of people served, the volume of water
delivered, the lower disease rates resulting
from access to clean water, or the improved
viability of local rivers and watersheds?”
“The ability to measure impact investments is
among several pieces of scaffolding needed to
support the growth of the impact investment
sector. In fact, assessment and rating systems
are among the most important tools for
impact investors.”
Measurement for Small and
Growing Businesses
Stanford Social Innovation Review
Genevieve Edens Saurabh Lall [sic]
08/07/14
http://www.ssireview.org/blog/entry/
measurement_for_small_and_growing_
businesses
In this article, the authors ask for a shift in
attitudes and practices for investors looking to
assess social performance.
Currently, most impact assessments are used to
keep people accountable, when in the future
they should be used to make decisions and
manage performance. One solution put forward
is the idea of a “Social performance-based
success fee”, designed to ensure that proper
social returns are achieved.
“Most investors pursued measurement so that
they were accountable to funders, accountable
to themselves, and attractive to potential
funders—mainly retrospective in nature. Very
few investors spoke about integrating their
social metrics with financial and operational
measures to actually manage performance and
drive decision-making.”
“In traditional private equity, fund managers
earn success fees (also called carried interest)
by hitting a certain level of return (the hurdle
rate). Vox Capital, an early-stage impact
investing fund in Brazil, gets the full success
fee only when it also reaches a certain level of
social impact, measured using B Lab’s Global
Impact Investing Rating System (GIIRS). If the
portfolio does not achieve its minimum social
targets, the fund receives only half the success
fee; it does not receive any success fee if it does
not reach its financial targets.”
Appe
diceAppe
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Appe
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49
Impact Investing
What’s next for impact investing:
Definitions, measurement and rising
expectations
DevEx Impact
Adva Saldinger
09/07/14
https://www.devex.com/news/what-s-next-for-
impact-investing-definitions-measurement-and-
rising-expectations-83781
This article looks at the challenges facing impact
investing as a whole, identifying that despite
growing as a whole, the investor base remains
fractured and not well understood.
The authors point out that since there is such a
diversity of motives and risk profiles amongst
investors, definitions and reporting should
change accordingly. The article then discusses
the ratings systems created by GIIN, and how
they can provide objective, useful metrics that
appeal to a broad spectrum of investors.
One problem identified in this report is the lack
of credibility attached to impact investing firms,
purely because this is such a new, unproven
field. The two solutions outlined are track
record (comfort in how past investments have
performed) and pipeline development (the
security in knowing that there will be a diversity
of future investments to choose from)
“There is more clarity now about what impact
investing is, but one of the greatest challenges
remains around how to define and talk about
those investments.
“Impact investing is not easily defined, in large
part because there are a spectrum of different
returns that are acceptable to the variety of
investors involved. Some investors, mostly
philanthropists, will look to impact investing
to provide a sustainable, re-investable flow of
capital and be willing to receive no return. On
the other hand, other investors may be willing
to accept low rates of return in exchange
for significant social or environmental
benefits and there are also those who expect
competitive returns.”
Social Good = Scale x Impact
(who knew?)
Stanford Social Innovation Review
Matthew Forti Andrew Youn
http://www.ssireview.org/blog/entry/social_
good_scale_x_impact_who_knew
This article highlights the need to focus our
assessment of social performance on two
different dimensions: Scale (how large the idea/
project is and will become) and impact (How
transformative and life-changing it can be).
The authors challenge funders to demand to
see evidence of both, as either scale or impact
alone won’t be sufficient to solve the magnitude
of problems society faces. This distinction in
terminology is very useful for those new to the
social impact world.
“We are troubled by the widening gap between
how those delivering services (particularly
nonprofits) and those evaluating interventions
(particularly academics) approach this
challenge. Nonprofits often focus on scale
while evaluators focus on net impact. We need
both, and we need nonprofits and evaluators to
adapt their approaches in pursuit of maximum
social good.”
ppen
ices
ppen
ces
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Impact Measurement:
50
Report on Impact Measurement
Highlights Importance of the Story
Vibeke Mair
March 11, 2013
http://www.civilsociety.co.uk/finance/
news/content/14659/report_on_impact_
measurement_highlights_importance_of_
the_story
This article is a good synopsis of the broader
report “Measuring social impact in social
enterprises”, and serves as a good distillation
of the key findings. It discusses the changing
perception of social impact measurement,
and the learnings that are changing how
measurement is utilised.
In particular, it focuses on the shift away from
SROI types of measurement, citing a decreased
demand for “pound value” (or dollar value) for
social impact. While this can be useful internally,
there is a trend towards measurement systems
that can be compared within the same industry.
“The overall conclusion is that much of
existing measurement fits within a range of
alternatives, many of which are useful, but
the choice of which will depend on the needs
of the user, rather than driven by funder or
commissioner need.”
“The report also says there was wide consensus
within the groups that the developing social
investment market was influencing the impact
measurement agenda, as funders needed to
prove the impact of their portfolio to their
own investors.”
Impact Investing’s Three
Measurement Tools
Margot Brandenburg
October 3, 2012
http://www.ssireview.org/blog/entry/impact_
investings_three_measurement_tools
This article provides us with some more context
on what led to the creation of three prominent
measurement tools: IRIS, PULSE and GIIRS. Each
of the tools are complimentary to each other,
playing a different but pivotal role in deriving
meaning from social measurement. A great
starting point for understanding the connections
and distinctions between the three, and why
Rockefeller saw the need to create universally
comparable metrics.
“Impact metrics—a catch-all phrase that means
many things to many people—will be more
important than ever as impact investing
continues to grow and mature.
Metrics play a critical role in distinguishing
good companies from good marketing, and
thus enable management, investors, and
other stakeholders to judge performance and
inform decisions on the basis of social and
environmental impact in addition to profitability.
This is particularly critical for impact investments
(as opposed to, say, negatively screened
investments) as they are, by definition, designed
to generate impact beyond financial return.”
“A triumvirate of distinct, but related, needs
was identified in relation to metrics in order
to build an industry that is defined not only by
risk and financial return, but also by social and
environmental impact:
• Management information systems for fund
managers and other data aggregators, who
otherwise often rely on a patchwork of
Excel spreadsheets to track impact data on
their portfolios;
• Impact ratings (performance standards) for
asset managers and owners, who reported
lacking the tools needed to assess their
pipeline and active portfolios on the basis of
non-financial performance;
• Standardized definitions of impact
performance measures that serve as
building blocks for the above as well as
enable benchmarking.”
pen
cesppeAppe

Impact Investing
51
A Short Guide to Impact Investing
Case Foundation
Updated September 2014
http://casefoundation.org/impact-investing/
short-guide#1286579
Arguably the most useful, comprehensive starter
guide to impact investing published to date. This
report covers the ideas behind impact investing,
the global need, and some critical differences
between II, CSR and Venture Philanthropy. It also
features a very practical glossary that is useful
for cutting through jargon. It gives context
around the global push towards impact investing
as a concept, not just an asset class, and nicely
frames the upcoming challenges facing the
industry, such as the need to measure social
impact in a way that is genuinely useful.
“Let’s make money more effective at creating
value, for every shareholder and every
stakeholder. Let’s make money more fearless
in delivering on its disruptive potential. Let’s
make money more willing to take real risks for
real returns.
In our giving, let’s give money more purpose,
more power, more impact. It’s charitable to
donate; it’s transformative to invest in the future
you want for our children’s children’s children.
If the head has been making investments and
the heart giving it away, it’s time to unite the
head and the heart and make money more.”
Measuring Impact: Subject paper of
the Impact Measurement Working
Group
Social Impact Investment Taskforce
September 2014
http://www.socialimpactinvestment.org/reports/
Measuring%20Impact%20WG%20paper%20
FINAL.pdf
This report serves as a “State of the Union” for
the impact investment/impact measurement
community, highlighting the trends, best
practices, risks and opportunities that are
emerging worldwide. It also features a number
of useful tools for the impact community,
such as the Impact Value Chain, The Four
Phases of Impact Measurement, and Seven
Guidelines For Building A Strong Impact
Measurement Framework.
“Though these guidelines are for investors, they
are equally valuable for investees. They are
based on the fundamental principle that impact
measurement should help impact organizations
manage performance, learn, improve
outcomes, and hold themselves accountable to
those they aim to serve.”
“Those who wish to implement impact
measurement today face a variety of
challenges. In light of this, the Working Group
has identified seven best practice guidelines
which impact investors can integrate into
investment management at the portfolio level
as well as into specific deals, and together with
their impact enterprises.”
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